After two days of back to back triple digit gains in the Dow for the first time since the election, overnight the torrid rally has faded, with European shares and U.S. stock futures little changed ahead of Trump's big unveil of his much anticipated tax cut plan as investors seek new impetus for a flagging relief rally. And, if as some traders expect, the rally is likely to be reignited no matter what Trump announces today (although a less hyperbolic plan may in fact be more favorable for risk, as it makes Trump's plan more likely instead of being shot down by Congress).

Despite the tapering of euphoria, world stocks hit another all time high on the back of strong earnings and the realization that whatever Trump says, the S&P - less than 1% from all time highs - will likely hit a new record. The MSCI world equity index, which tracks shares in 46 countries, was up 0.1% to a fresh record high. It is up nearly 2% this week and 8.35% since the start of the year. As Bloomberg's David Ingles charts, the market cap of all stocks in the index, and thus the world, has just surpassed $50 trillion for the first time ever.

"On top of (the French election result) we have had a very decent set of corporate earnings in the U.S. and that helped push the market further along the same direction," said Investec economist Philip Shaw. "I am unsure how further along we really are on the tax cutting agenda, but it is certainly not doing market sentiment any harm," he added.

Further details on President Trump's tax cutting plans are expected to be announced later on Wednesday, potentially reviving reflation bets. The threat of a U.S. government shutdown this weekend also receded after Trump backed away from demanding Congress include funding for his planned border wall with Mexico in a spending bill.

The dollar rebounded modestly for a second day after plunging in the past week to lows not seen since November, gaining against most group-of-10 currencies even as the WTI slide continues, with crude languishing below $50 a barrel after a report on U.S. supplies. European stocks halted a five-day advance that had taken them to the highest since 2015 as earnings painted a mixed picture on growth.

According to Bloomberg, investors are waiting to see if Trump’s conciliatory tone on the border wall could help avert a government shutdown even as most members of the Congress are in the dark about the $1.1 trillion spending bill. Policy reviews by the Japanese and European Central Bank may also set the tone for rest of the week.

European shares pulled back slightly from 20-month highs as some disappointing corporate results weighed on the market but Asian stocks powered ahead. The Stoxx Europe 600 Index was little changed, after a five-day rally to the highest since August 2015.

Japan’s Topix index rose 1.2 percent, climbing for a fifth straight day for the longest winning streak this year.Futures on the S&P 500 Index were flat after the underlying gauge climbed 0.6 percent on Tuesday, to within 10 points of its closing record.

The early FX price action this morning has been in the EUR, as the market has faded the story out late yesterday that the ECB are considering signalling a tweak in their monetary policy stance in the wake of the Macron first round victory at the weekend. This sounds premature to say the least, and alongside this, we have seen Draghi and Co curbing some of the hawkish sentiment in response to their last meeting. The recovery EU wide is a little better than fragile, but as the Fed have been struggling to do in their communication to the market, the ECB now face a similar task.

The slew of positive news pushed the Nasdaq composite to a record high on Tuesday while the Dow and S&P 500 brushed against recent peaks.

Against a strengthening dollar, the euro held on to the bulk of the gains made earlier this week; it fell 0.13 percent to $1.0911, but is still up 1.72 percent from Friday's close.

U.S. Treasury yields, meanwhile, rose above 2.30 percent for the first time in two weeks. "U.S. bond yields have broken higher without the support of commodity prices which is one of the clearest signs that the Trump trade is back," Morgan Stanley analysts said in a note. Euro zone government bond yields nudged up ahead of Trump's keenly anticipated tax announcement.

Oil prices resumed their downward trend on Wednesday as data showed a rise in U.S. crude inventories and record supplies in the rest of the world cast doubt on OPEC's ability to cut supplies and tighten the market.

Economic data include revision of retail sales. Procter & Gamble, PepsiCo are among companies scheduled to publish results. Alphabet, Microsoft, Amazon.com, Twitter, Intel, Barclays, Bayer AG and Total SA are among major companies releasing results later this week. The Bank of Japan is widely expected to keep the settings on its monetary easing program unchanged at the end of a two-day policy meeting on Thursday. Though inflation remains well below the central bank’s 2 percent target, it’s ticking up. The ECB sets monetary policy later that same day. With officials indicating little chance of a policy change, the focus will be on any signals from President Mario Draghi that the central bank is debating an exit from its extraordinary stimulus.

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Market Snapshot

• S&P 500 futures down less than 0.1% to 2,384.00
• STOXX Europe 600 unchanged at 386.90
• MXAP up 0.5% to 149.55
• MXAPJ up 0.3% to 487.86
• Nikkei up 1.1% to 19,289.43
• Topix up 1.2% to 1,537.41
• Hang Seng Index up 0.5% to 24,578.43
• Shanghai Composite up 0.2% to 3,140.85
• Sensex up 0.7% to 30,149.50
• Australia S&P/ASX 200 up 0.7% to 5,912.04
• Kospi up 0.5% to 2,207.84
• German 10Y yield fell 1.0 bps to 0.368%
• Euro down 0.2% to 1.0910 per US$
• Brent Futures down 0.04% to $52.08/bbl
• Italian 10Y yield rose 8.4 bps to 1.972%
• Spanish 10Y yield rose 1.1 bps to 1.686%
• Gold spot up 0.1% to $1,265.84
• U.S. Dollar Index up 0.2% to 98.98

Top Headline News from Bloomberg

• President Donald Trump’s expected call to slash the corporate tax rate to 15 percent -- a number that many economists say would boost the deficit so much that the cut would be short-lived -- may be less about policy and more about deal-making
• The roll-out of legislation this week that would rip up much of the Dodd-Frank Act marks a pivotal moment for Republicans’ efforts to overhaul post-crisis financial rules
• Credit Suisse Chief Executive Officer Tidjane Thiam is bowing to investor pressure to keep the bank’s biggest profit generator and instead will bolster capital by selling stock in a rights offer
• KKR & Co. offered to buy a controlling stake in Hitachi Kokusai Electric Inc., the chip system-making unit of Hitachi Ltd., in a bid that values the target at $2.3 billion
• BHP Billiton Ltd. said it may resurrect the sale of its under-performing Fayetteville shale gas assets in Arkansas a little more than two weeks after billionaire Paul Singer proposed spinning off the mining company’s U.S. petroleum division
• China Southern Airlines Co. said it plans to buy 20 widebody aircraft from Airbus SE in a deal worth about $6 billion, according to a filing to the Hong Kong stock exchange Wednesday
  KKR to Acquire Hitachi Kokusai in Deal Valued at $2.3b
• IQiyi, Netflix Reach Content Cooperation Agreement
• Uber to Question Alphabet’s Larry Page in Robocar Case
• Bayer-Monsanto Deal Needs EU Scrutiny, NRW Minister Tells RP
• Shanghai to Develop ‘Water Town’ Next to Disneyland, Zone Says

Asia equity markets maintained the positive momentum from their counterparts in US, where the DJIA outperformed on strong earnings and the NASDAQ Comp. closed over 6,000 for the first time ever. ASX 200 (+0.8%) gained on return from holiday, while Nikkei 225 (+1.1%) benefited after the JPY weakened against its major counterparts. The Hang Seng (+0.3%) and Shanghai Comp. (+0.2%) also conformed to the upside after the PBoC continued its liquidity injections. Finally, 10yr JGBs were lower with demand dampened amid the broad-based heightened risk appetite and as the BoJ kick-started its 2-day policy meeting in which the bank is widely expected to remain on hold, while there was also notable underperformance observed in the super long end.
PBoC injected CNY 40bIn in 7-day reverse repos, CNY 20bIn in 14-day reverse repos and CNY 20bIn in 28-day reverse repos.

Top Asian News

• China’s Homemade Aircraft Carrier Is Second in Xi’s Fleet
• China Merchants Seeks to Overtake UBS in Asia With Offshore Push
• China Market Strains Worsen as AAA Rated Vanke Scraps Bond Sale
• ICRA Sees FY18 Foreign Flows Into Indian Debt Capped at $5- $10b
• China Eastern Said in Cargo Stake Sale Talks With Private Firms
• Huarong Investment Risks in Spotlight After Glaucus Report
• Hyundai Motor Counts on SUV, Genesis Brand to Revive Profits
• Korean Peninsula on Brink of War Provoked From Outside: Russia

European bourses fail to find any firm direction with equities trading somewhat mixed yet again. Earning updates are yet again at the forefront of investors' minds, with Credit Suisse outperforming in the SMI this morning after announcing profit rose above analyst estimates, additionally the Swiss bank noted that they will raise USD 4bIn in a rights issues. Elsewhere, luxury names have been lifted after Kering stated that their organic growth were significantly ahead of expectations. Credit markets have found some support following yesterday's risk sentiment as the bund has seen a slow grind higher since the cash open, benefiting from month-end extension buying needs.

Top European News

• Santander’s Brazil Patience Pays off as Rebound Lifts Profit
• Kering Shares Surge After Gucci’s Strongest Growth in 20 Years
• Standard Chartered Profit Soars as Bank Overhaul Gains Traction
• Daimler Raises Earnings Forecast as Spending Pressure Mounts
• HSBC, RBS Saudi Ventures in Talks to Form $78 Billion Lender
• BHP Considers U.S. Shale Asset Sale After Activist Call
• Handelsbanken’s Capital Supremacy Fails to Charm Shareholders
• Telia Sees Lower Uzbek Fine of $1 Billion as Sales Top Views
• SEB Sees Riksbank Move After ’Shock’ Sweden Manufacturing Data
• De Benedetti Bets on Media as Italy Business Clans Look to Sell

In currencies, the Bloomberg Dollar Spot Index increased 0.2%, climbing for a second day after a 0.5 percent drop on Monday. The yen slipped 0.1 percent to 111.24 per dollar, after dropping 1.2 percent on Tuesday. The euro lost 0.2 percent to $1.0903, after four straight days of gains. The early price action this morning has been in the EUR, as the market has faded the story out late yesterday that the ECB are considering signalling a tweak in their monetary policy stance in the wake of the Macron first round victory at the weekend. This sounds premature to say the least, and alongside this, we have seen Draghi and Co curbing some of the hawkish sentiment in response to their last meeting. The recovery EU wide is a little better than fragile, but as the Fed have been struggling to do in their communication to the market, the ECB now face a similar task. So the 1.0950 test was inevitable given the headline driven market, but EUR/USD has since tempered this with a move back to 1.0900, while EUR/GBP — traditionally bid into month end — is also restrained through 0.8500 — but largely down to Cable resilience ahead of 1.2750, but now seemingly 1.2800 (1.2805 the low this morning). For EUR/USD, 1.0850-30 looks strong in the meantime. USD/JPY has also slipped back a little, and as we noted yesterday, sellers aplenty in the 111.00-112.00 area. We suspect a large chunk of the upside is down to the hopes and expectations of credible tax plans to be 'outlined' in an announcement later today, so the risk here is that the market is (again?) disappointed. EUR/JPY has also relented given the above move, and after failing to touch on 122.00, we are back in the lower 121.00's.

In commodities, gold struggled with reclaiming USD1270 yesterday, and we have since slipped back into the mid USD1260's as the recovery in the USD index allied with a modest recovery in risk assets put further pressure on precious metals. Silver has also given up ground, and has dipped into the USD17.50's. Oil prices back in focus after we slipped back under USD50.00 in WTI, resuming its decline and losing 0.2% to $49.45 per barrel, after halting a six-day selloff on Tuesday. . OPEC talks now key as Oil bulls need further encouragement on an extension to the output cuts. The major producers all seem broadly open to the idea, most of all Saudi Arabia as ongoing comments suggest. Key EIA report today with speculation inventory will contract. Base metals all following the risk mood, with ranges tight ahead of Trump announcement later today. Copper buoyed but struggles at USD2.60.

It’s a very quiet day ahead in terms of data. Over in Europe French consumer confidence for April is the only number of note and is expected to be unchanged at 100, and there’s nothing of note to watch in the US. However earnings season continues with Proctor & Gamble and Boeing due to report today among other names. Away from data, we will see UK PM Theresa May host EC President Juncker and EU’s Brexit negotiator Michal Barnier today

US Event Calendar

• 7am: MBA Mortgage Applications, prior -1.8%
• 10am: Revisions: Retail Sales

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DB's Jim Reid concludes the overnight wrap

So on day 97 of his Presidency, today is all about Mr Trump's tax plans of which the eventual success (or lack of it) will likely define the economic landscape of his administration. The WSJ last night reaffirmed that Mr Trump wants to slash corporate tax including on pass through businesses. He is also planning a tax break for child care expenses. There was also talk of a territorial tax for companies where they would pay little or no tax on future foreign earnings. Bloomberg also report that a repatriation tax of 10% is planned on the estimated $2.6tn of stockpiled offshore earnings. Anyway whatever we hear today it will still have to go through legislative approval and there will a lot of talk about how tough that will be if it's not revenue neutral.

Staying with US politics there were signs yesterday that a US government shutdown may end up being averted as President Trump showed signs of easing up on his demands for the immediate funding of the border wall. So far the spending plan needed to keep agencies running till September has been kept quiet ahead of this Friday’s deadline, but Trump’s willingness to push back funding the wall to later this year could be a sign that he would be ready to sign the spending bill.

Ahead of the big day in Washington, sentiment across global markets remained positive yesterday following the relief rally on Monday. European equities ticked up on the day (STOXX +0.2%) while the Eurozone Banks index gained by +0.6%. The DAX and CAC posted small gains of +0.1% and +0.2%. US equity markets maintained momentum with the S&P gaining +0.6%, led by Materials (+1.4%) and Financials (+1.2%). Strong blue chip earnings helping. The Nasdaq also hit a new all time high, breaking the 6,000 mark for the first time after gaining +0.7% on the day. Interestingly this was 17 years after first hitting 5,000 although without checking one wonders how many constituents were in the index back then that are still there today. We note that having taken 17 years to fill in this last 1,000 point gap, it only took 49 days to move from 4,000 to 5,000 back in 2000. Another stat is that the index is now up around 4.7 times from its lows in March 2009. Impressive and all these stats are a reminder that timing is everything in investing!

Elsewhere risk-on continued in credit. In Europe we saw Main and Crossover spread tighten by -2bps and -8bps respectively, while Senior and Sub financials spreads tightened by -5bps and -11bps on the day. Over in the US we saw similar moves tighter as CDX IG and HY tightened by -2bps and -7bps respectively. We saw a broad based sell off in government bond markets with yields rising across all maturities for US treasuries (2Y: +4bps; 10Y: +6bps) and Bunds (2Y: +2bps; 10Y: +5bps) . Yields for 10Y OATs and BTPs yields also rose on the day by +7bps and +9bps respectively, with the 10Y OAT-Bund spread widening by +2bps.

In currency markets we saw the dollar (-0.3%) weaken for the second day in a row while the Euro gained +1.0%. Sterling also gained +0.5% to reach its highest level this year. Moves over in commodity markets were fairly muted at both ends of the risk spectrum, with WTI and Gold mostly flat. The Asian session is also relatively quiet with the positive mood of the last few days continuing. The Nikkei is 0.7% higher as the BoJ start their 2-day meeting, the Hang Seng +0.6% and the Shanghai Comp +0.35%. Gold, the Dollar, Oil and Treasuries haven't moved much in the overnight session.

Looking now at some of the data out yesterday. In Europe, the ECB Q1 Bank Lending Survey was broadly positive as credit standards loosened across all three major categories. Loans to enterprises dipped back into easing territory (-2%) after having ticked up by +5% in Q4 2016. The net easing was roughly in line with the expected change in standards as reported in the previous survey, and banks now expect a net tightening of lending standards for enterprises in Q2 (2%). Standards for consumer credit and lending to households also loosened in Q1 (-7% and -5% respectively). Despite loose lending conditions credit demand growth from enterprises is slowing down: net 6% of banks reported an increase in loan demand from enterprises in Q1 but this was well below the 11% that expected an increase (as reported in the previous survey) and also less than the 18% reporting an increase in loan demand in Q4 2016. Banks however expect net loan demand from enterprises to accelerate in Q2 2017 (12%).

Elsewhere in Europe we also got French manufacturing confidence numbers for April that rose more than expected (108 vs. 105 expected; 104 previous) while business confidence was flat on the month (104) as expected. In the UK the PSNB numbers (including banks) for March were reported well above expectations at GBP 4.4bn (vs. 1.5bn expected).

Over in the US we saw a large number of housing market indicators which were mostly positive. The FHFA house price index rose by +0.8% mom in February (vs. 0.4% expected) while new home sales unexpectedly rose to 621k (vs. 584k expected; 592k previous). In terms of softer data, the consumer board consumer confidence indicator for April fell more than expected to 120.3 (vs. 122.5 expected; 125.6 previous). The Richmond Fed manufacturing survey also fell on the month but less so than expected (20 vs. 16 expected; 22 previous). It’s a very quiet day ahead in terms of data. Over in Europe French consumer confidence for April is the only number of note and is expected to be unchanged at 100, and there’s nothing of note to watch in the US. However earnings season continues with Proctor & Gamble and Boeing due to report today among other names. Away from data, we will see UK PM Theresa May host EC President Juncker and EU’s Brexit negotiator Michal Barnier today.